Your 401k plan is a fantastic savings vehicle for retirement.
If you’re one of the many Americans who hasn’t saved or contributed enough during the economic meltdown — you’re not alone and it’s a good time to start contributing again.
Heck, anytime is a good time to get some 401k advice, so kick start your 401k again with this 5 Minute Guide To Your 401k Plan.
Starting a 401k plan sooner is better. If you don’t use your contribution amounts each year, you lose out on the opportunity to save for retirement because the space cannot be carried forward. Just don’t withdraw your money before you’re 59.5 years old because you’ll be charged a big penalty of 10%.
Get Your Employer Match
If your employer matches your contributions, make yourself richer by grabbing this free money but note that employer contributions don’t affect your maximum contribution limit. Your employer can help you set up a 401k plan to get immediate tax savings on pre-tax contributions, benefit from tax deferral on your investment earnings, and to score that contribution match.
401k Contribution Limits
Your 401k plan is a smart way to save money and decrease your tax bill to Uncle Sam by hundreds (even thousands) a year by contributing up to the annual maximum of $16,500 for tax year 2009. If you are age 50 or older, a catch-up provision allows you to contribute an additional $5,500 into your 401k plan to help you further decrease your tax bill and increase your retirement savings.
2009 Contribution Limits: $16,500
2009 Catch Up Limits (50 and Older): $5,500
401k Bottom Line
Starting a 401k plan with your employer and contributing 10% of an annual income of $50,000 adds up to $5000 saved towards retirement. Depending on your state, this could decrease your income tax bill by about $1,500. If your employer makes a 401k match of 50%, you’ve just earned a free $2,500 which will compound over the years and help to further nest your retirement.
Easy Retirement Guides:
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